The Rooster Call: How Volume Impacts Markets Around Holidays

Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day

Good Morning Traders!
You are kidding me, right? Today is already June 1?

Yesterday we saw ES reject 2100 as expected. The trading was very slow due to holiday hang-over effect. I suggest all retail traders make note of the light volume the day prior and after a 3-day USA holiday. Bonds rose and are up strongly today as risk aversion sets gains following.

Our first live room trade yesterday generated over $200 in profit. I suggested considering the expected slow action, there is nothing wrong with ending the trading day. Think about it…$200 X 5 trading days = $1000. $1000 a week X 4 weeks is $4000 a month. Obviously, day traders are aggressive or they would not day trade. Aggressive traders many times think along the lines of “if I made $200+ on my first trade, maybe I will hit $1000 today!” The market eventually beats this out of you. One learns to take what the market gives as a ship steers through the open waves of the ocean in choppy seas. The market is ALWAYS the boss.

Our day trading went bobbing up and down and fortunately we ended profitable. It’s all about momentum. No momentum or very little momentum and we are similar to driving a high powered sports car in a parade.  All that power going 5 miles an hour.

So you pick your days. You pick your battles. This is part of the trading mind developed intuitively. You mature in your thinking and stop looking for the 100$ solution.  There is none. There are high probability systems, but nothing is 100% in this trading game…or in your life.

We approach the trading game as a knowledgeable trader who has honed his/her system. If you have a 70% win rate, you will have 30% losses. End of story. Each loss in your system gets you closer to your next win. The trading is NEVER about a single trade, a single day, or a single week. Your trading system record-keeping shows you an edge. Your live and die in trading by your ability to execute as perfectly to your plan as possible with the quiet confidence of knowledge you have an edge.  Never forget that.

You chose this profession. You know the ups and the downs. You know when you sign your name on the dotted line with your broker that no matter what happens, you are responsible. You are the trader in command. Other traders with deep pockets want your money and they have a lot of fire-power. Still, you learn to read the foot prints of price. You learn how price actions repeat. You keep the business simple so the brain can absorb and intuit easily…subconsciously, all possible through belief in what your record keeping has proven.

You can trade. Never forget this. I do not care how hard or what has ever happened to you. Simulated trading is your stepping stone. Use it. Build upon it. Execute as perfectly as possible knowing the ego, fear and anxiety are minimized by your quiet confidence of your trading edge.

Yes, learning trading techniques takes time. Everything in life takes time for meaningful contribution. Building any business takes time. Those who are impatient are lined up for the slaughterhouse without knowing.

Cultivate patience with yourself first, and then the market. Always believe in your ability to adapt and always understand trading does not define you as an individual.

Overnight

Crude is like the pied piper for equity index futures. We once again teeter on the edge of ES falling in the normal price action we have observed throughout 2015 to date. Nothing special.

The immediate driver is OPEC meeting in Vienna June 2. So let’s have an understanding if OPEC makes some kind of unified showing of production freeze with Iran participating, we have reason to see new market highs. Virtually all stocks will rise. If OPEC shows greater commitment to the price war, disagreement on production, and Iran continues her own pace of production, the market will still at first attempt to find a positive. If not, we look for a sell-off.

Let me remind you, the entire rise in crude was ordained and forecast by seasonal tendency. Therefore, what happens when seasonal tendency peaks in July? OPEC had better do something to keep the dream alive, otherwise, we expect normal lower price action.

A second driver this week is the ECB policy statement with Count Draghi’s press conference on Thursday. No change is expected…just a regurgitation of “we will do whatever it takes,” which is the rally cry going on 4 year now. Deflation has beaten the ECB at their own game.

The ECB’s bond buying program starts in June. This plan will likely benefit corporate officers who will copy USA corporations buying company stock, which helps keep stock markets higher. This is Draghi plan…keep the market elevated.

Eurozone factories PMI show continued stagnation. No surprise. PMI reading comes in at 51.5. Previous month reading was 51.7 in April. A reading of 50 or higher marks expansion, whilst below 50 is contraction.

The third driver this week is the USA Employment Situation report, also called non-farm payrolls. This is the mother of all economic reports…especially for bonds and US dollar, then ripple effects to gold and equity index futures.

We will watch the ISM Manufacturing Index closely today at 10AM ET as a market driver. Yesterday, Chicago PMI slipped into contraction.

The Dallas FED Manufacturing survey also dropped into negative territory with production index falling from 5.8 in April to -13.1 in May. General activity index fell from -13.9 in April to -20.8 in May. We look at the Dallas FED report due to the tremendous job creation in this region.

The Beige book is released today 2PM ET. Considering the FED talk of raising rates, the Beige book is likely showing more positives than negatives. Sometimes the market will move off this report.

Iron ore falls to 3 month low. Iron ore is all about China as is copper. Chinese manufacturing PMI reported today at 50.1, unchanged from April. The private sector Caixin manufacturing PMI index slipped to 49.2, marking the 15th consecutive month of contraction and the lowest reported figure since February (Seeking Alpha).

Brazilian Real fell yesterday taking down coffee. Overnight coffee trying to stage another rise. Sugar lower yesterday on Real drop with follow-through today.

The Pound fell yesterday and today on new polls showing Brexit Yes votes have lost traction.

Japan’s Prime Minister will postpone the second sales tax rise from October 2017 to October 2019. The sales tax will rise from 8% to 10%. This action is proof in the pudding that the first sales tax hike was a bad idea. 

The OECD (another think tank filled with “experts”) yet again lowered growth forecast for the US, UK, and Japan. Surprisingly, OECD raised growth forecast for Eurozone from 1.4% to 1.6%. Global growth will come in at 3% this year and 3.3% next year due to “weak trade growth, sluggish investment, subdued wages, and slower activity in key emerging markets.”

The Australian GDP reported at 1.1% growth first quarter over previous quarter beating expectations. Annual growth reading 3.1%.

Economic Events
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Gallup U.S. Job Creation Index
8:55 Redbook Chain Store Sales
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
2:00 PM Fed’s Beige Book

Markets
Equity indexes lower with crude. VIX rising. Nikkei 225 lower on Yen strength. DAX and STOXX 50 also affected by higher Euro. Up to USA traders to turn the tide.

Natural gas surge yesterday continues today as discussed last night in the client video could occur.

Gold attempts reversal bar yesterday. Looking weak. Silver does not participate looking weak.

Copper big drop. This move forecast in the weekend Trader Weekly Review.

Grains lower as Brazilian Real falls and the reality of Chinese stock pile sale of corn and soybeans takes hold. Wheat provided $1000 whack lower yesterday…not unexpected. Too much world wheat.

Coffee tries again today.

Sugar hit by Real yesterday shows follow through action today.

US dollar incrementally lower. Could change on ISM report if the report is good.

Euro higher on PMI reports.

Yen higher.

Pound falls on Brexit fears.

Canadian dollar follows crude.

Aussie bounce higher on GDP report.

To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.